What Actually Happens to Debt When You Die
Here's what really happens:
Let's Do the Math on This Couple
If the husband dies tomorrow, what happens to the wife?
The Irony Nobody Mentions
This couple makes $230,000/year. They spent $310,000/year. They accumulated $1 million in debt. You know what they probably DIDN'T spend money on?
The Real Dave Ramsey Lesson
Dave Ramsey is famous for saying "debt is dumb." And he's right. Because when you die, you don't face the consequences. Your spouse does. Your kids do. Your aging parents who co-signed your student loans do.
Frequently Asked Questions
Can creditors take my life insurance payout?
Generally no. Life insurance paid to a named beneficiary goes directly to them and is protected from your creditors in most states. It's one of the safest ways to leave money to your family.
My spouse and I have a lot of joint debt. Who pays if I die?
Joint debt becomes 100% your spouse's responsibility. This includes joint credit cards, joint mortgages, and any loans you both signed. Life insurance can cover these debts so your spouse isn't crushed.
What about student loans?
Federal student loans are discharged upon death. Private student loans may have a co-signer who becomes responsible. Parent PLUS loans are also discharged if the parent or student dies.
We're already in debt. Can we afford life insurance?
If you have debt, you likely can't afford NOT to have life insurance. A $500,000 policy for a healthy 30-year-old is about $25-35/month. That's less than one dinner out.
Protect Your Family From Your Debt
Get a free quote in 5 minutes. No obligation. No pressure.